Popenko Iryna Tarasivna

Scientific adviser: Mamontova N. A.

National University of Ostroh Academy

In this article the theoretical basis of the effective deposit operations of commercial banks is appraised and the financial analysis of deposit operations of Public Joint-Stock Company “State Savings Bank of Ukraine” is conducted. In addition, the recommendations to ensure the efficiency of operations of the commercial bank deposit are provided.

Keywords: deposit operations, passive operation, financial stability, liquidity, financial resources profitability.

Formulation of the problem. The main source of investment of the country is considered deposit money. Thus it can be argued that the improvement of the ways the deposit operations are performed will help to increase the financial stability of the banking system, increase the level of confidence to depositors and creditors, increase investment, which in turn will help improve the economy and overcome the economic crisis. The extension of the resource base of commercial banks requires well-designed reforms in the banking sector, and most importantly, it requires the improvement of the mechanism of deposit operations of the banks.

Analysis of recent research and publications. The theoretical basis of the concept “deposit operations” has been studied and the research of the effectiveness of their implementation has been conducted by many both foreign and domestic economists. A significant contribution to the study of this issue was made by such domestic scientists as V. Lagutin, A. Moroz, M. Savluk, R. Kotsovska, V. Rychakivska and others.

The aim and task of the study. The purpose of the research is to determine the main directions of improvement of the deposit operations of commercial banks on the basis of theoretical study and evaluation of the practical aspects of the chosen subject.

Summary of the basic material. The main passive operations are deposit ones. Deposit is cash or non-cash funds in national or foreign currency, which are held on client accounts in the bank specified in the contract terms and conditions of the use of the deposit, or without a specific term and returned to the customer in accordance with the legislation of Ukraine and the contract.

By its nature, the deposit has two sides, which can be defined as client money that he/she can use in the future for his/her own benefit. On the other hand, these are bank funds used for conducting active operations and obtaining income. So, deposit is financial resources or capital for earning a profit. Deposit is more effective than cash to the extent it brings income to the owner, but the income is much lower than the capital brings. This feature is the basic principle of any bank, namely the bank pay less for its clients for deposits than it gets from other clients for credits [1, p. 245].

The object of deposit operations is funds provided by the owner of the bank on certain bilateral agreement conditions. The subjects are owners of banks and funds, the first of which is the lenders of money and others are creditors.

There is a classification of deposit operations:

• The method of execution:

– bearer deposits;

– personal deposits.

• The terms:

– demand deposits;

– term deposits;

– savings deposits.

• The economic agents:

– deposits of economic entities;

– deposits of individuals;

– deposits from other banks;

The most common classification is the classification of terms, so it should be considered more detailed.

Demand deposit is cash held on correspondent accounts of current bank and can be returned to the owner on his/her first request. Interest on such deposits shall be paid in accordance with the contract made between the bank and its client. Demand deposits are usually used for performing a calculation. These deposits include balances on correspondent accounts of companies, funds on correspondent accounts for payment transactions with other banks, credit balances with foreign correspondent banks.

Term deposits are cash resources on deposit in the bank kept for a specified period of time, which is set by the agreement between the bank and its customer. Term deposits involve deposit accounts of legal entities, savings certificates, term accounts and accounts of target individuals, and accounts for depositing budget funds or funding for capital investment for a certain period and in a certain period of time.

Savings certificates serve for their owners as a way to accumulate their savings. These savings are extremely beneficial for any bank, as they are issued on a long term basis, and therefore may be used by the bank in the long term [2, p. 287].

To study the implementation of deposit operations in the crisis, Public Joint Stock Company ” State Savings Bank of Ukraine” was elected; this is a banking institution that focuses on creating an enabling and favorable terms of customer service, expanding the range of banking products and services, and increasing market presence.

On the current stage of its development, Public Joint Stock Company ” State Savings Bank of Ukraine” offers its customers the following types of deposits:

– “My deposit”;

– “My pension deposit”;

– “My progressive deposit”;

Each of these deposits is characterized below. Deposit “My deposit” has the following characteristics:

• The deposit can be replenished from UAH 200., US 10, and € 10;
• Interest can be paid on monthly basis or there is possibility of capitalization of interest (bank interest on deposits is paid on monthly basis by crediting the deposit account);
• Customers cannot get refund earlier than stipulated period;
• Automatic prolongation;
• Minimum deposit – ₴ 200, $ € 10.

Deposit “My pension deposit” has the following main features:

• Money can be invested in the bank for such a program only by the holder of pension certificate;
  • The deposit can be replenished from UAH 200, US 10 and € 10;
  • Interest can be paid on monthly basis or there is possibility of capitalization of interest (interest on deposits is paid monthly by crediting the deposit account);
  • Customers cannot get refund earlier than stipulated period;
  • Automatic prolongation;
  • Minimum deposit – ₴ 200, $€ 10.

Deposit “My progressive deposit” has the following features:

• The deposit can be replenished without restrictions amount;
• Interest is paid on monthly basis;
• Deposit term is up to one month;
• Interest rate – 11.50%;
• Customers cannot get refund earlier than stipulated period;
• Automatic prolongation;
• Minimum deposit – ₴ 200, $€ 10;
• Extension bonuses + 0.10%, + 0.05% $ €;
• With each extension, the interest rate on the deposit and bonus increases within 11 prolongations;

The value of the interest rate on all deposits is elected by bank on the basis of the refinancing rate, the state of the money market and the peculiarity of the customer’s deposit policy. Public Joint Stock Company ” State Savings Bank of Ukraine”  never offers the excessive interest rates on deposits to its customers. According to the data, in 2017 Public Joint Stock Company ” State Savings Bank of Ukraine” offers the following deposit rates: 11%, 16%, 16.5%, 17%, 17.5%, 18%. The lowest interest rate is offered by banks on deposit “My progressive deposit”, which is 11.5% and the highest rate is offered on deposit “My Deposit” and “My pension deposit”, rates of these deposits range from 16% to 18%. Thus, it is obvious that deposit rates are not too high, by deposit proposals they range from 11% to 18%, indicating a balanced policy on bank rates on deposits (Table. 1).

Table 1

Interest rates on deposits in JSC “Oschadbank” depending on the currency and term deposit for 2017

Source: [3].

The procedure of opening of any above mentioned deposit accounts is quite simple, since a person must have only a Ukrainian passport and a taxpayer identification number. In case the additional documents are needed, the client will be informed by the banker. While opening a deposit, a person can also draw up the power of attorney with the right to dispose of funds or testamentary disposition.

In Public Joint Stock Company ” State Savings Bank of Ukraine”  there is a loyalty program, this is a number of bonuses and discounts for cardholders (tab. 2).

Table 2

Characteristics of loyalty program for customers of JSC “Oschadbank” for 2017

Source: [3].

As it is shown in Table 3, the value of deposits increased during the study period, namely within 2014-2015 biennium deposits increased by UAH 38.01 billion (67.56%) and within 2015-2016 by UAH 51.31 billion (54.43%). Demand deposits are dominated in the structure of deposits, in 2016 their share is 53.48%. Deposit interest rate is small, and the level is differentiated depending on the term, type of payment, period of notice of withdrawal, the overall dynamics of money market rates and other conditions. However, there is a tendency towards a decrease in their share; the share in 2016 is 48.29%.

Table 3

Dynamics of deposits JSC “Oschadbank” in the 2014-2016 biennium

Source: [4].

Considering the customers who open deposits, in 2014 and 2015 the most frequent ones are accounts of individuals, namely 2015 there are UAH 53.87 bln (57.14%). However, this situation has changed in 2016 and legal entities as clients began to dominate, their share was 52.50%, or USD 76.43 bln. It is a negative consequence that arose because of the fact that people lost confidence in the bank (Table. 4 ).

Table 4

The dynamics and structure of deposit accounts of JSC “Oschadbank” in 2014-2016, bln., UAN

Source: [4].

Key indexes of the effective deposit policy are defined by the business plan of Public Joint Stock Company ” State Savings Bank of Ukraine”, budget and other indicators. Indexes are compiled and calculated by structural subdivisions of Public Joint Stock Company ” State Savings Bank of Ukraine”:  the Retail Banking Department, Department of Corporate Banking, Treasury, department of the risks, and the financial and economic department. The macroeconomic environment, market potential, intensity of competition, profitability of individual operations and readiness of the bank to perform certain operations or services are taken into account.

Table 5

Dynamics of deposit policy of JSC “Oschadbank”  in 2014-2016 years

Source: [4].

The criteria of maximizing return on assets over the past three years have significantly increased. In 2013 it was -7.1%, and at the end of 2016 it increased to 0.21%. The effective use of customer funds has also improved since the instant liquidity ratio increased to 16.15% during 2015 – 2016. The increase of this indicator proves the active position of the bank and an increase of its profitability. General safety factor decreased significantly in 2014 – 2015 years, and in 2015 it was 4.75%, but by the end of 2016 it sharply increased to 8.22%. Along with the increase of general safety factor, the level of the reliability of capital in liabilities has also increased to 3.80% in 2016, so it indicates an increase in activity of banks in the deposit market due to the increase of reliability and stability of the bank.

Indicators P1, P2, P3 indicate the inefficient use of funds by the bank as these indicators had a very small value during the study period, and during 2014 – 2015 these indicators had a negative value. At the end of 2016 indicators have the following indexes, namely P1 – 0.23% P2 – 0.22% P3 – 2.69%. The ratio of loans and deposits shows that the bank needs additional funds to attract customers, in 2016 index was – 0,22%. In 2016 the utilization of deposits has significantly increased, namely by 24.53%, that indicates a better use of deposits. Efficiency ratio of deposit policy increased, but it still has a negative value, at the end of the period it was 28.01%, which indicates that the policy of the bank has improved (tab. 5).

Considering the indexes of deposit policy, Public Joint Stock Company ” State Savings Bank of Ukraine”  has improved the effectiveness of its implementation in recent years. However, most indicators remain critical, so new methods of deposit operations need to be applied for improving the existing system.

Today service of insurance deposit accounts by insurance companies has gained popularity in our country. The aim of this service is to create a system to protect funds on deposit in the bank in case of its bankruptcy. Such insurance system is popular in all developed countries. It works to protect small depositors from possible losses and prevent withdrawals from the bank during the difficult financial situation.

In order to ensure greater flow of funds on term deposit accounts and savings, it is advisable to simplify the operation of the relevant accounts, namely the procedure of crediting the deposits, cash withdrawal and transfer of deposits. It is better to use more term deposits with additional installments, and reduce the restrictions on payments that use funds on deposit.

In the future, in order to develop the system of the bank the experience of foreign countries should be used. Particularly, there should not be clear delineation of demand deposits, term and saving accounts, in addition, the mixture of types of accounts should be introduced.

So, bank should maintain a high level of customer service, offer new products and quickly respond to the needs of its customers for the effective implementation of deposit operations during the economic crisis. It will help the bank maintain and expand its customer base, and consequently increase its resource base. The experience and standards of international banks should also be used for improving the banking system in Ukraine.

References

1. Epifanov, A. Operation of commercial banks: [Tutorial]. / A. Epifanov, N. Maslak, I.V. Salo. – Symy: “University Book”, 2007. – 523 p.
2. Vovchak, O. Credit and banking [Tutorial] / O. Vovchak, N. Rushchyshyn, T. Andreikiv. – K: Znannia, 2008. – 564р.
3. The official site of JSC “Oschadbank” [Electronic resource]. – Access: http://www.oschadbank.ua/ua/.
4. The annual financial report of JSC “Oshadbank ” in 2016. – [Electronic resource]. – Access: http://www.oschadbank.ua/upload/iblock/ d9f / FS% 20SSBU% 202015% 20separate% 20ukr% 20ISA.pdf
5. The annual financial report of JSC “Oshadbank” in 2015. – [Electronic resource]. – Access: http://www.oschadbank.ua/upload/iblock/ d9f / FS% 20SSBU% 202015% 20separate% 20ukr% 20ISA.pdf
6. Annual financial report of JSC “Oshadbank” in 2014. – [Electronic resource]. – Access: http://www.oschadbank.ua/upload/iblock/ d9f / FS% 20SSBU% 202015% 20separate% 20ukr% 20ISA.pdf